Embattled Aviva exits China funds sector

Aviva Investors, part of the UK insurance group Aviva, has abandoned its efforts to gain a licence to trade in China’s $380bn mutual fund industry, according to a report from Reuters.

Aviva had been trying for for five years to launch a joint venture partnership with Central China Securities Co. Ashmore Investment Management, the specialist emerging markets fund manager will take Aviva’s place.

The venture still awaits regulatory approval. Aviva Investors is the second fund manager to pull back from China. Belgian financial group KBC Group abandoned its China fund venture six months ago.

Aviva’s decision underlines the difficulty of getting a licence in China, while current trading conditions are also difficult. The number of funds on offer has more than tripled since 2007 to over 1,000 so far, but the industry’s total assets are down by a quarter over the same period. China’s main stock market index SSEC is down 60% over the past five years.

The pullback comes at a difficult time for Aviva Investors, which this year announced a fall in profits of 10%. In January, Aviva initiated a major restructuring, culling 160 jobs. Chief executive Alain Dromer and a number of top executives also departed.

In July, Aviva closed its the Absolute Tactical Asset Allocation range because of sub-scale net asset value. In August, Aviva announced it is in the process of selling its £1.2bn Sustainable and Responsible Investment (SRI) funds, headed by Peter Michaelis, to Alliance Trust Investments. Katherine Garrett-Cox, chief executive of Alliance Trust, said the price was ‘fairly modest’.

The transfer, which concerns seven Oeic funds, is set to complete by early 2013. At the time, Aviva stated the sale would allow it to focus on its core strengths, which includes fixed income, multi-asset solutions, real estate and core equities

Ashmore remains optimistic on China: “We have been looking for some time to expand our footprint in China,” it said in a statement, adding the new venture, to be named Ashmore-CCSC Fund Management, will be based in Shanghai.